Public Policy Research Support

Tax reform: capturing the impact on e-commerce jobs

India’s much-anticipated tax reform, GST (Goods and Services Tax), could affect SME sellers in e-commerce differently from others. Athena reviewed the impact of Tax Collection at Source (TCS), a particular provision of GST applicable to only to e-commerce firms. It considered factors such as increase in compliance costs, price elasticities, labor coefficients and profits. If implemented, TCS could cause delays in cash flow cycles and negatively affect sellers’ ability to manage their working capital. This would increase the overall financial costs for the small and medium sellers.

Using a scenario analysis, Athena determined that the potential employment loss could be significant, in the region of 180,000 jobs. It therefore recommended the removal of this e-commerce specific provision of TCS in the light of its detrimental impact on the health of small and medium sellers in the long term. At the time, the TCS provision was deferred before its planned role out, in line with Athena’s policy insights.